Supreme Court Criticizes NCLAT's Practice on Physical Filing of Appeals in Addition to E-Filing: ‘Modernize Judiciary’

Supreme Court Criticizes NCLAT's Practice on Physical Filing of Appeals in Addition to E-Filing: ‘Modernize Judiciary’

The Supreme Court by its coram comprising of Chief Justice of India Dr. DY Chandrachud and Justice JB Pardiwala criticized the practice adopted by the National Company Law Appellate Tribunal (NCLAT) requiring physical filing of appeals has been made mandatory in addition to e-filing of appeals.

The bench in the present case directed that a copy of the present judgment shall be forwarded to the Chairperson of the NCLAT and to the Secretaries to the Union Government respectively in the Ministries of (i) Finance; (ii) Corporate Affairs; and (iii) Law and Justice, for ensuring compliance and remedial steps.

The dispute in the appeal arose over the period of limitation applicable for filing an appeal against an order of the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016 (for short IBC).

The Court reiterated that IBC is a complete code and Section 238 of the IBC provides that the Code shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. Relevant provisions of the IBC, Limitation Act 1963, NCLAT Rules 2016 and administrative orders are extracted below and are referred to, in turn.

Having regard to the above sequence of Rules and administrative orders, it is evident that on the one hand, Rule 22 of the NCLAT Rules 2016 requires the presentation of an appeal at the filing counter in the prescribed mode, but on the other, NCLAT also envisages e-filing of appeals.

Mr. Sanket Kumar Agarwal (“Appellant”) filed an application under Section 7 of the IBC before the NCLT, seeking initiation of Corporate Insolvency Resolution Process against APG Logistics Private Limited. On 26 August, 2022, the NCLT dismissed the application. Subsequently, the Appellant filed an application for obtaining a certified copy of the NCLT order, the same was uploaded on the website and provided to the Appellant on 15 September, 2022. Following which, the Appellant e-filed an appeal on 10 October, 2022 before the NCLAT, against the NCLT order. An application for condonation of delay of five days was filed along the appeal and the physical copy of appeal was filed on 31 October, 2022.

On 9 January, 2023 the NCLAT dismissed the appeal for being barred by limitation. It was concluded that the appeal is barred by limitation since it was instituted on the 46th day following the order of the NCLT, exceeding the outer limit of 45 days that was permissible under Section 61 of IBC.

The Appellant preferred an appeal before the Supreme Court against the NCLAT order.

The Court noting the sequence of Rules and administrative orders, found that on one hand, rule 22 of the NCLAT Rules 2016 requires the presentation of an appeal at the filing counter in the prescribed mode, but on the other, NCLAT also envisages e-filing of appeals. This was evident in the Standard Operating Procedure (SOP) dated 3 January 2021 which mandates the filing of a physical copy of an appeal as per the procedure prescribed in the NCLAT Rules 2016, while referring to the procedure for the hearing of cases through the virtual mode, using the e-filing portal.

The Court noted that in the present case, the appellant had exercised due diligence and applied for a certified copy upon pronouncement of the order in terms of Rule 22(2) of the NLCAT Rules 2016. The certified copy was provided to the Appellant on 15 September 2022.

Hence, the period of 10 days between 5 September 2022 and 15 September 2022 taken by the court to provide a certified copy of the order ought to be excluded when determining the period of limitation under Section 61(2) of the IBC, the bench opined.

The Court while concluding expressed its dismay by noticing the flip-flops on the part of the NCLAT in providing administrative guidance on whether limitation would commence from the date of e-filing or from the presentation of the appeal at the filing counter.

The bench remarked, “With technological advances, the country’s judiciary and tribunals must move towards efiling. This process has already commenced and is irreversible. The Union Government must have a fresh look at the rules to encourage e-filing across tribunals. Perhaps one way forward would be to constitute a Working Group to make a comprehensive assessment of the position across tribunals and suggest regulatory changes. Moreover, it is utterly incomprehensible why NCLAT should insist on physical filing in addition to efiling.”

The Bench directed that a copy of the present judgment shall be forwarded to the Chairperson of the NCLAT and to the Secretaries to the Union Government respectively in the Ministries of (i) Finance; (ii) Corporate Affairs; and (iii) Law and Justice, for ensuring compliance and remedial steps.

The appeal has been allowed and the NCLAT order has been set aside.